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Groupon Hits a 52-Week Low: Is This a Deal or What?

This stock just hit a 52-week milestone. Where will it head from here?

Shares of Groupon(Nasdaq: GRPN) hit a 52-week low on Thursday. Let's look at how it got here and whether dark clouds are ahead.

How it got hereLooking at today's trading volume of 3.5 million, it looks like the deal for Groupon shares is on! Unfortunately, instead of getting half off at a local Italian eatery, you'll end up with nothing but sleepless nights and portfolio underperformance if you buy in.

Shares have now traded even lower than they did in April, as the daily dealer reported earnings in May. Investors actually cheered in the wake of the release, sending shares as much as 27% higher intraday. Revenue soared 89% to $559.3 million, while gross billings similarly skyrocketed 103% to $1.35 billion. But all those gains weren't enough to translate into black by the time you reached the bottom of the income statement, instead resulting in a net loss of $3.6 million.

All three of these heavyweights have jumped into the daily deals business, along with countless local start-ups. Amazon invested in LivingSocial, Google started Google Offers, and Microsoft opened up MSN Offers. Those companies are worthy contenders, although they focus on their segments that are actually profitable.

What's next?Groupon has little hope of turning enviable top-line growth into sustainable net income growth while it has no competitive advantage beyond a catchy name and competition springs up all around it with entrants eager to lose money. Groupon has much more pain in store.

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Author

Evan is a Senior Technology Specialist at The Motley Fool. He was previously a Senior Trading Specialist at Charles Schwab, and worked briefly at Tesla. Evan graduated from the University of Texas at Austin, and is a CFA charterholder.